Analysis of Bad Debts
Allowance for doubtful accounts receivable (bad debts) is a contra account which reduce the balance of the company gross accounts receivable. The relationship between the allowance and the balance in receivables should be relatively constant unless there is a change in the economy overall or a change in customer base.
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- Cash Flow Statement
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Reportable Segments
- Analysis of Geographic Areas
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Return on Assets (ROA) since 2020
- Total Asset Turnover since 2020
- Price to Earnings (P/E) since 2020
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for credit losses ÷ Accounts receivable, gross
= 100 × ÷ =
- Accounts Receivable, Gross
- The gross accounts receivable has exhibited a strong upward trend from 2020 to 2024. It increased from approximately $156.9 million in 2020 to $575.0 million in 2024. This suggests a significant growth in credit sales or receivables generation over this period, indicating expanding business operations or increased sales volume.
- Allowance for Credit Losses
- The allowance for credit losses was not reported in 2020 and 2021 but appeared in the data from 2023 onward, with values of $10.1 million in 2023 and $10.5 million in 2024. This introduction and slight increase may indicate a more conservative approach to estimating potential losses or recognition of increased credit risk as receivables grew.
- Allowance as a Percentage of Accounts Receivable, Gross
- From the data available for 2023 and 2024, the allowance as a percentage of gross accounts receivable decreased from 3.76% in 2023 to 2.8% in 2024. Despite the nominal increase in allowance, this decline as a percentage indicates that the allowance for expected losses has not kept pace proportionally with the increase in gross receivables, possibly reflecting improved credit quality or confidence in collections.
- Overall Observations
- The company has experienced substantial growth in accounts receivable over the five-year span. The emerging provision for credit losses starting in 2023 points to a developing credit risk management strategy, although its relative share compared to receivables has slightly declined. The trends suggest that while receivables have expanded rapidly, credit loss reserves have been cautiously maintained, potentially reflecting either improved credit management or optimistic receivables recovery expectations.